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Lesson_65_Fiscal Policy with Flexible Exchange Rates

Lesson_65_Fiscal Policy with Flexible Exchange Rates -...

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1 Lesson 65 1 Fiscal Policy with Flexible Exchange Rates Suppose the economy is in an equilibrium with excessive unemployment Can fiscal policy be used effectively to stimulate output? This lesson incorporates effect of fiscal policy on exchange rate to answer this question Lesson 65 2 Start with IS-LM Y i 1 IS 1 LM 1 Y 1 i F Y Lesson 65 3 Expansionary fiscal policy shifts IS to right Y i 1 IS 1 LM 1 Y 1 i F Y
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